It’s not just home insurance. Californians are struggling to insure their cars, too.

It’s not just home insurance. Auto insurance is also increasingly hard to get in California, according to insurance agents who say they are struggling to find quotes for clients who would have easily gotten insurance just a year ago, as inflation and other factors take a toll.

“The withering availability of auto and home insurance in the state seems headed for a death spiral,” Mike D’Arelli, executive director of American Agents Alliance, an association of insurance agents that provides access to insurers as a wholesaler for its members, wrote in an email to The Chronicle.

“Never in my career have I heard from so many insurance agency owners and consumers, desperate to buy auto or home insurance, yet unable to purchase it due to lack of availability,” he continued. […]

Last month, State Farm announced it would stop writing new homeowner’s policies in California, setting off worries of shrinking insurance availability in the state, particularly in high-risk wildfire areas. The Chronicle also confirmed that Allstate quietly stopped writing new homeowners, condo and commercial policies last year. 

In addressing concerns about homeowner’s insurance, California’s insurance commissioner Ricardo Lara has emphasized the role of climate change making coverage more tenuous across the country, not just in California. But with auto insurance, the climate change connection doesn’t hold — spurring insurers to blame what they say is dysfunctional regulation and consumer advocates to accuse insurers of withholding coverage as a political ploy. 

The pullback started about six months ago, and it now has reached a point where no insurers will write auto insurance in California through his association anymore, D’Arelli said.

Safeco stopped writing auto insurance through D’Arelli’s association this month, while Travelers suspended D’Arelli’s group and 1,000 others about six months ago, he said.

Safeco spokesperson Gleen Greenberg did not answer whether the company is slowing business in California, but said the insurer continues to offer auto insurance in the state. Travelers spokesperson Chesleigh Fowler wrote in an email to The Chronicle that “the number of agents affected by the temporary action taken on new business is significantly less than 1,000.”

Los Angeles insurance agent Laine Caspi, who writes auto plans for Progressive and Mercury, has had a similar experience. The carriers could not be immediately reached for comment.

Auto carriers are taking on little business, with new 10- to 30-day review periods until coverage actually kicks in, Caspi said. 

“I had a client who I tried to quote the other day, super clean, one not-at-fault accident 2½ years ago, and they declined the business. If it’s not squeaky clean, it’s very tough to push through,” Caspi said. 

Auto insurers are also increasingly requiring that new customers pay in full rather than in monthly or quarterly payments, both D’Arelli and Caspi said. If existing customers lapse on a payment, their plans are often canceled with no grace period, leaving many Californians struggling to find new coverage in the market, they said. 

“These sorts of tactics to prevent the agent from wanting to submit business or slowing things down are pervasive. They are everywhere,” D’Arelli said.

Jerry Conrey, an insurance broker in Orange County, said his agency has noticed pullbacks in business from Safeco, Mercury, Nationwide, Geico, Chubb and Progressive in writing auto insurance, particularly for high-valued vehicles on which insurers are taking a larger risk. The carriers could not be immediately reached for comment.

“If you happen to drive a Tesla, or you happen to drive a Kia … or you happen to drive a motorcycle or a scooter or anything that isn’t the bread-and-butter of insurer, you’ve just had your likelihood of being able to find insurance become four times harder than it was a year ago,” Conrey said. 

Inflation has caused many costs associated with auto accidents to go up, such as car parts and hospital bills, insurance agents said. More significantly, they pointed to the fact that insurance commissioner Lara didn’t approve any rate increases for auto insurers from May 2020 to October 2022 — which Progressive’s CEO cited in an earnings call last year as an explanation for slowing business in California. 

The rate moratorium was part of Lara’s efforts to compel insurers to compensate consumers he says were overcharged during the beginning of the pandemic, when many were not driving as much because of stay-at-home orders. 

Rex Frazier, president of Personal Insurance Federation of California, an advocacy association of personal injury and casualty insurers in the state, said the auto insurance market right now is the direct result of the rate moratorium. He said the commissioner should consider a “triage approach” to the rate requests currently awaiting approval. 

“There were no rate increases (for auto insurance), so why would we be surprised that there’s an impact in the market?” Frazier said. “Each company makes its own decisions about the best way to survive in an uncontrollable environment.”

But consumer advocate Harvey Rosenfield, who wrote Proposition 103, a measure much-maligned by the industry that requires insurers to get rate increases reviewed and approved by the commissioner, said his organization has found that the commissioner approved $1 billion in “unjustified” rate hikes for auto insurers in 2023 alone. 

“The crisis that they’re instigating, the insurrection in the insurance marketplace where they don’t like Prop. 103, they’re willing to violate the law to create a shortage in the marketplace. Obviously, the insurrection is spreading to the auto insurance marketplace,” Rosenfield said.

All auto insurers are required by California law to offer a policy to drivers with one or fewer violation points in the past three years, but insurance commissioner Lara said his department has heard of insurers instituting “delay tactics” when they offer and sell policies even to so-called “good drivers.” He said all agents who experience this should contact the hotline so the department can investigate.

The commissioner disputed that his rate moratorium is responsible for the current issues in the auto insurance market. In fact, the department disputes that there even was a moratorium: It received only six rate increase requests from companies representing less than 1% of the private passenger auto insurance market from the start of the pandemic to November 2021, and the “big increase” in filings didn’t come until June 2022 — with the first approval coming soon after in October, Lara said. 

According to Lara, the problems in the auto insurance marketplace are linked to global inflation and supply chain issues, which made it harder to get car parts.

“We still have a very thriving market, and we’ve got to retool it so we can meet this ever-changing economic paradigm we find ourselves in,” Lara said.

In the meantime, Conrey is concerned that both in the homeowners and auto insurance sectors, business can’t go on as usual any longer. Every day, Conrey said he is losing revenue because he has nowhere to take a client as expenses in running his agency go up. 

“Maybe we could have this problem fixed by this time next year, but it’s got to start now. If not, this market will get worse before it gets better,” Conrey said.

Read the full article